Determinants of Economic Development Economic development is not determined by any single factor. Economic development depends on Economic, Social, Political and Religious factors. We can simply classify it into Economic and Non-economic factors - - Economics of Development and Planning . .
. Economic Factors . Natural Resources: The principal factor affecting the development of an economy is the availability of natural resources. The existence of natural resources in abundance is essential for development.
A country deficient in natural resources may not be in a position to develop rapidly. But a country like Japan lacking natural resources imports them and achieves faster rate of economic development with the help of technology. India with larger resources is poor. .
Capital Formation: Capital formation is the main key to economic growth. Capital formation refers to the net addition to the existing stock of capital goods which are either tangible like plants and machinery or intangible like health, education and research. Capital formation helps to increase productivity of labour and thereby production and income. It facilitates adoption of advanced techniques of production.
It leads to better utilization of natural resources, industrialization and expansion of markets which are essential for economic progress. . Size of the Market: Large size of the market would stimulate production, increase employment and raise the National per capita income. That is why developed countries expand their market to other countries through WTO.
. Structural Change: Structural change refers to change in the occupational structure of the economy. Any economy of the country is generally divided into three basic sectors: Primary sector such as agricultural, animal husbandry, forestry, etc; Secondary sector such as industrial production, constructions and Tertiary sector such as trade, banking and commerce. Any economy which is predominantly agricultural tends to remain backward.
. Financial System: Financial system implies the existence of an efficient and organized banking system in the country. There should be an organized money market to facilitate easy availability of capital. .
Marketable Surplus: Marketable surplus refers to the total amount of farm output cultivated by farmers over and above their family consumption needs.